Reducing material waste means greater resource efficiency, less pollution and more profits. Each dollar saved on raw materials costs goes straight to the bottom line.
Raw material costs have edged up over the last few years and throughout 2008. The bloated costs today continue to pressure manufacturers of all sizes — a challenge that is unlikely to change anytime soon.
Prime Advantage, a buying consortium serving midsized manufacturers, recently found that an overwhelming 93 percent of respondents agree that raw materials (including stainless steel, nickel, copper and other metals and plastics) top the list of concerns for the second half of 2008.
While these findings are of little surprise, it is the significant and rapid change in perception that should be particularly revealing: In a Prime Advantage survey at the start of the year, 43 percent of respondents said they were apprehensive about the rising cost of raw materials. A mere six months later, those who say raw material costs will continue to be an economic concern for the remainder of 2008 jumped by 50 percent.
The data, collected from 72 senior-level representatives of industrial manufacturing companies, also determined that two-thirds of manufacturers (up 49.5 percentage points from the start of the year) agreed that energy costs are “a major concern” for the rest of the year. Identified as a concern by only 17.5 percent of respondents in early 2008, the new survey indicates that number has jumped to 67 percent.
“The current economic climate requires us to be wise spenders both as individuals and business people,” explains Elaine Sharp, program marketing manager of sustainable business resource Envirowise. “Achieving savings through better use of resources has a tangible effect on companies’ bottom lines and as a result we have often seen improved staff motivation and morale.”
Before you can eliminate raw material waste, you need to be able to identify it. To do this, every aspect of the production process should be addressed and tracked.
“The lifecycle flow of materials (e.g., end-use material efficiency improvement and cascading through reuse, recycling, and recovery) and their storage in the economy (stockpiling) are not well understood, and as a consequence, important options for efficiency improvements might be overlooked as attention is focused instead on energy efficiency in materials production,” recommends the Materials Research Society in an April 2008 paper.
“Issues such as raw material use, waste production, energy consumption and emissions to the atmosphere should be considered at each stage of the product lifecycle,” recommends the UK’s BusinessLink.gov, which offers practical advice for businesses.
To save the most money, businesses must take a strategic approach to minimizing materials waste. Consider focusing on at least these areas:
Many companies over-order the amount of materials required to fulfill the order, especially in the make-to-order environment, says Envirowise (free registration required). In fact, according to the latest Manufacturing Index from the National Association of Manufacturers and IndustryWeek, “nationwide inventory-to-sales ratio for overall manufacturing reached a six-year high” in the third quarter of 2008.
The true cost of excess inventory levels should be analyzed carefully before a business orders excess raw materials. Just-in-time inventory and lean manufacturing can eliminate such unnecessary costs by matching production to demand in real time to eliminate the need for excessive inventory, warehouse and equipment space, etc.
“Check how you handle and store raw materials,” notes BusinessLink. “Even failing to empty all bags and containers properly could lead to significant amounts of waste.”
“Reusing items is another way to stop waste at the source because it delays or avoids that item’s entry in the waste collection and disposal system,” the U.S. Environmental Protection Agency (EPA) recommends.
Envirowise offers this basic “wastebusting” example for the factory:
In most paint and chemical plants there is a plentiful supply of empty raw material drums to use for waste containers. But even in plants where this possibility for re-use is recognized you may still see new drums used for waste, usually for want of a system of supplying empty raw material drums to the areas that need them — the waste-generating departments.
“Look carefully at the waste you’re disposing of,” BusinessLink suggests. Could any of it be put back into the production process or reused for another purpose? Reuse turns materials that would otherwise become waste into valuable resources. Already, today’s products are being increasingly manufactured with total- or partial-recycled content, such as recovered plastic in carpeting and park benches.
“Formulate for disposal or recycling,” Envirowise advises. “Avoiding the problem of obsolescence should start at the earliest possible stage — when formulating new products.”
“In tracking waste, you should understand how many good parts you’re getting to how many bad parts,” says private-equity firm Gaebler Ventures. “This could be applied to raw materials or finished products. If you’re constructing metal chairs and you have a good deal of scrapped steel, you should be aware of what percentage of your order is being utilized.”
Where possible, use materials that have already been recycled or can be reused, recycled or recovered.
One example of an area for improvement is packaging materials, from which a high proportion of waste comes. “Use the minimum packaging required for safety, hygiene and consumer acceptance,” recommends NetRegs.gov.uk, an environmental regulations advisor for small businesses. “When businesses manufacture their products with less packaging, they are buying less raw material,” notes the EPA. “A decrease in manufacturing costs can mean a larger profit margin, with savings that can be passed on to the consumer.”
“The bottom line is that pricing pressures for raw materials and commodities will likely continue to be an obstacle to success for many North American manufacturers,” Louise O’Sullivan, president and founder of Prime Advantage, said in a statement.
For manufacturers, using raw materials more efficiently can bring significant cost savings.
To prevent the waste of materials, continually assess systems and revise procedures and policies. Increasing the efficiency of industrial processes and the flow of materials through the economy is a slow transformation process that will take time.
“At all times, in all processes, waste can be reduced,” says Envirowise. “Where the payback seems poor, consider again whether all the costs have been taken into account and bear in mind that disposal costs, material costs and external pressures for improvement will continue to increase.”
For tips on reducing the use of raw materials, read Envirowise’s guide containing 200 tips for reducing waste (free registration required).
Save Money by Reducing Waste: Reduce Your Use of Raw Materials
NAM/IndustryWeek Manufacturing Index – 3rd Quarter 2008
by David Huether
Rising Raw Material and Energy Costs are Raising Concerns among North American Industrial Manufacturers in 2nd half of 2008
Prime Advantage, July 22, 2008
Raw Materials and Energy Expenses to a List of Economic Concerns in 2008 for Small to Midsize Manufacturers
Prime Advantage, Feb. 15, 2008
Commodities Send Sell Signal Before Long Recession
by Millie Munshi
Bloomberg News, Nov. 3, 2008
Beat the Credit Crunch Through Resource Efficiency
Envirowise, June 2008
Wastes – Resource Conservation: Reduce, Reuse, Recycle
U.S. Environmental Protection Agency
Reducing Industrial Energy Use and CO2 Emissions: The Role of Materials Science
by Dolf Gielen, John Newman and Martin K. Patel
The Materials Research Society, April 2008
Eliminate Waste from Your Operations
by Andrew Goldman
Packaging Good Practice